Dying Intestate, Wills & Trusts: Overview
Most people understand an estate plan is a good thing. However, many people do not get an estate plan in place because they fail to understand the differences between a will and trust – and dying without either. Hopefully, Dying Intestate, Wills & Trusts: Overview will be informative and helpful.
To outline the differences, we will use an example assuming you have two children, but no spouse:
- Intestate. If you die intestate, your accounts and property will go through probate and all the world will know what you owned, owed, and who got what. Your mortgage company, car loan company, and credit card companies will all seek payment on balances you owed at the time of your death and it is not uncommon for predators (fake creditors) to make demands for payment – even if they are owed nothing.
Without an estate plan, state law will decide who gets what and when.
- If your only heirs are your two children and you have not provided any instructions, state law will mandate divvying up proceeds equally.
- Your older child will get their share immediately if they have attained adulthood (18 years old).
- However, the court will appoint a guardian to manage the money any minor child until that child becomes an adult.
- Shockingly, that guardian could be a stranger who charges a significant fee for their services.
- If you die without a valid will, the court will also decide who raises your minor child.
In short, dying intestate allows state law and the court to make all the decisions on your behalf – regardless of what you may have intended and it is open to the general public.
- Will. If you die with a valid will, your accounts and property will still go through the probate process. However, after creditors have been paid, the remaining accounts and property will go to whom you have named in your will.
- If you want to leave money to your children and name a guardian for the minor, the court will usually abide by your wishes.
- The same holds true if you specified that you wanted to give money to a charity, an aunt, or neighbor.
- Keep in mind predatory creditors could still be an issue since your death has been publicized and probate is a public process.
In short, while a court oversees the process when you have a will to coordinate how you want your affairs to be handled, the process remains public.
- Trust. If you have a trust, you control your estate plan, accounts and property. Accounts and property owned by the trust are not subject to the probate process allowing the details and process of transferring accounts and property to the intended individuals to remain private.
A trust identifies a trusted individual (trustee) to manage your affairs with specific instructions on how accounts and property should be dispersed and when.
- One word of caution – a trust must be properly funded in order to bypass probate.
- Funding means that ownership of your accounts and property has been changed from your name individually to the name of your trust.
- Think of your trust as a bushel basket. You must put the apples into the basket just like you must put your accounts and property into the trust for either to have real value.
You do still need a will (pour-over will) to get any accounts or property inadvertently or intentionally left out of your trust into the name of the trust and to name guardians for minor children.
In short, a trust allows you to maintain control of your accounts and property through your chosen trustee, avoid probate, and leave specific instructions so your children are taken care of – without receiving a lump sum of money at an age where they are more likely to squander or have seized from them.
Do not let the will versus trust debate slow you down. Hopefully, Dying Intestate, Wills & Trusts: Overview was informative and helpful. For further information of legal assistance, call us today and we will put together an estate plan that works for you and your loved ones whether it is a will, trust, or both. We are available for in-person and virtual consultations.